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Cadila: Aggressive growth strategy

Dec 11, 2001

The performance of Cadila Healthcare, so far in the current year has been modest. It has been able to log less than 7% growth in topline for the first half of the current year. However, the company is on an acquisition spree to log faster growth through in-organic route. Recently, Cadila acquired India’s No.1 Cardiovascular product ‘Aten’ from Kopran for a total consideration of Rs 950 m. On last count ‘Aten’ had revenues in excess of Rs 380 m, logging a growth of more than 12% p.a. with more than 20% market share. The purchase of ‘Aten’ coupled with new product introductions in its newly commissioned Zydus Neuroscience division puts the company in the league of leading cardiovascular companies in India.

Zydus Neuroscience division has launched more than 8 products in the first half of the current year itself. Further, the company would also benefit from its acquisition of perpetual rights to market five leading brands from Asta (one of the promoters of German Remedies)

Cadila is also logging several co-marketing alliances to offer a better basket of products. It has already entered into several co-marketing alliances with Kopran, Ranbaxy and E-Merck for some of the drugs in therapeutic segments of anti-diabetics, CNS and other high growth segments. Remarkably, Cadila launched Once-a-Day version of Ofloxacin drug in alliance with Ranbaxy.

Further the acquisition of 28% stake in German Remedies last year is also expected to help the company in leveraging entry in to high margin therapeutic segments like respiratory, gynaecology and oncology, where German Remedies has a strong presence.

At the current market price of Rs 131, the stock is valued at 8 times FY02 expected earnings. These acquisitions are expected to help Cadila in logging faster growth rates going forward. However, the concern is the financing of these ventures may put an undue strain on the company’s balance sheet. The prospects of the company would depend on how fast the ambitious acquisitions pays off and performance of its new product introductions.

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